If he's an active dog I think surgery is really your best bet. I'm a huge fan of alternate treatments (did 10+ years of acupuncture myself) but I don't think this condition is fixable other than through surgery. You can perhaps lessen any pain through massage and so forth, but not *fix* it, so my understanding is that it will continue to deteriorate.
That said, $4500 is ridiculous for this surgery. For comparison's sake, my friend just got it done 2 weeks ago on her 3kg toy poodle and the cost was roughly US$1,200, which exactly matches the estimate Cell mentioned above. (The dog also had to stay at the vet for about a week, but I don't know if that hospitalization cost was *part* of the $1200 or *on top of* the $1200.)
The anesthetic is a large part of the cost so you have to add another $100 or so every time you move up one size from there.